After a harrowing autumn when the phone just stopped ringing, Dale Brenke, president of Schmidt Siding & Window Co., in Mankato, Minn., wasn't expecting a lot for 2009. "Forecasting?" he asks. "At the beginning of the year I didn't know which end was up. There was no forecasting. All I could forecast was that if I worked really hard I couldn't help but survive."
Survive he and his company did, though Brenke is far from assured that the U.S. economy is out of its slump. For many, including those who have operated home improvement companies through past recessions, the last year or so has been the most difficult economic time they've had to deal with. Tom Capizzi, owner of Capizzi Home Improvement, on Cape Cod, Mass., saw his company's sales expand every year until 2008, when they dropped from $4.5 million to $3.65 million. January and February were "really bad," Capizzi says. But since that time sales have begun to move and he expects to hit the $4 million in sales that he is budgeting for in 2009. He has also hired two new sales reps.
Not the Old Days
Many companies have found themselves forced to cut payroll, marketing, and other costs as sales have contracted. "You've got to run your business as it is today, not as it used to be or the way you want it to be, 'cause it's changing right now," says Charles L. Smith, CEO of THV, America's Home Improvement Company, one of the largest U.S. home improvement companies, headquartered in Louisville, Ky. A swift response to changed conditions - including a 5% reduction in payroll - enabled THV to come out of the first quarter with reduced sales but greater profitability.
Smith says that while he's hopeful that a strong third quarter will allow him to get his company "back to last year's numbers," the fourth quarter will be the one that makes the difference. "We are in good shape," he says. "If the economy doesn't go into the tank, we'll work our way out just fine."
Companies have discovered that in a sustained downturn such as this, quickly adapting is key to survival and growth.
"Basically, you become a smaller company and you run things differently," Brenke says. "We've learned to be nimble and to make tough decisions as soon as we have to." Apart from laying off staff, changing products is another area where flexibility is sometimes called for. Last year, for instance, HomeCrafters, in Frederick, Md., did 80% of its business in sunroom sales. This year, owner Geoff Barker says that he's hoping to exceed 2008, which was a "tough year." But this time his sales will be 50% windows, decks, and siding. That will mean selling many more contracts, since window and deck sales are typically a third of a $35,000 sunroom ticket. Appearing in any and all available "face-time" venues, such as an Earth Day celebration in downtown Frederick, has helped.
Tax Credit Boost
What has also helped HomeCrafters and many other companies so far are the tax credits resulting from the American Recovery and Reinvestment Act, passed in February this year. "It's the good news," Barker says.
Many home improvement contractors are seeing tax credits lift their window and door sales. Brenke, for instance, says that window and door sales at Schmidt Siding are up 10% as a result of tax credits. Sales of steel roofing - eligible for credits - are up 50% over last year. "It's been a huge, huge help," Brenke says.
Michael Tarsovitch, owner of Great Lakes Construction, in Erie, Pa., says "it seems like every call we go out on, they ask about it." Tax credits also helped push sales at Windows and Doors of Indianapolis Today. "It's a great closing tool," says sales representative Bill Clifford.